Banks vow to continue to sell insurance on Web sites, as government prepares to prohibit practice

Describing themselves as “shocked” by the Canadian government’s plan to introduce legislation that would prohibit banks from selling insurance on their Web sites, Canadian banks say they will continue to sell insurance from their Web sites in the meantime, “in compliance with current law.”
Currently, the Bank Act prohibits a bank from selling or promoting insurance products at its branches. Recently, the Office of the Superintendent of Financial Institutions (OSFI) issued a ruling that a bank’s Web site is not the same as a bank branch for the purpose of selling insurance.
“…[A]s a result, a bank may, on its Web site, promote in Canada any insurance policies or any insurance companies, agents or brokers, subject to the conditions that the regulations impose on such promotion outside a bank,” OSFI ruled.
Subsequent to OSFI’s February 2009 ruling, Finance Minister Jim Flaherty sent a letter to the Insurance Brokers Association of Canada (IBAC) saying:  “The Government of Canada intends, at its earliest opportunity, to adopt specific policy measures by adapting our policy to reflect technological advances. This means that Web sites will become subject to the same insurance business regime that currently applies to branches.”
IBAC released the contents of Flaherty’s undated letter on Oct. 9.
Flaherty indicated in his letter to brokers that he had asked banks “to initiate steps quickly to adapt their business practices to meet this policy objective.”
But reports indicate the banks will do no such thing until the law has been changed.
“Banks pride themselves on being in compliance with the law and we are in compliance with the law,” Terry Campbell, vice president of policy at the Canadian Bankers Association (CBA), is quoted as saying in the National Post.
In a press release, the CBA says it was “completely shocked that Mr. Flaherty would want to limit how and where consumers can access information about insurance. Further, Mr. Flaherty has taken this step without any public consultations with Canadians or the banking industry.”